Moody's cuts Sony's credit rating to junk

TOKYO – Moody's cut its credit rating on Sony to junk on Monday, saying the Japanese electronics giant had more work to do in repairing its battered balance sheet.

The international ratings agency lowered its view of the company to Ba1 from Baa3, meaning its debt is now seen as below investment grade, a move that threatens to push up Sony's borrowing costs.

"While Sony has made progress in its restructuring and benefits from continued profitability in several of its business segments, it still faces challenges to improve and stabilize its overall profitability," Moody's said in a statement.

"Of primary concern are the challenges facing the company's TV and PC businesses, both of which face intense global competition, rapid changes in technology, and product obsolescence."

The downgrade was the latest to hit Japan's embattled electronics industry – including Sony rivals Sharp and Panasonic – which has continued to lose ground to overseas rivals even as a weak yen helped boost their profitability.

"Sony's profitability is likely to remain weak and volatile, as we expect the majority of its core consumer electronics businesses – such as TVs, mobile, digital cameras and personal computers – to continue to face significant downward earnings pressure," Moody's said.

It added that Sony's popular new PlayStation 4 console would help earnings at its videogames unit, but warned that profitability would likely not top levels seen in previous years. – Agence France-Presse

source: gmanetwork.com

Moody's, S&P, Morgan Stanley settle subprime mortgage investment suits

NEW YORK - Credit ratings agencies Moody's and Standard & Poor's, and investment bank Morgan Stanley have reached agreements to settle two lawsuits on accusations that they hid the risk of "subprime" mortgage investments to customers.

The lawsuits, one from King County in northwestern US state of Washington, the other from Abu Dhabi Commercial Bank, and which date back to before the 2008 economic meltdown, were dismissed by a Manhattan federal court, according to a court filing late Friday.

The plaintiffs claimed that the defendants failed to properly disclose the risk of their investment in a fund that bought bonds backed by subprime mortgages.

The McGraw-Hill Companies, the parent company of Standard and Poor's, told AFP that it ended the two disputes without admitting guilt or responsibility, and that the terms of the agreement were confidential.

Spokespeople for Morgan Stanley and Moody's were not immediately available for comment.

The trial was especially crucial for S&P: on February 5 the US Justice Department filed a lawsuit seeking at least $5 billion in civil penalties for losses due to inflated ratings of mortgage bonds.

The suit claims that S&P knowingly exaggerated the ratings on financial securities, misrepresenting their true credit risk.

The suit cited S&P's top-grade ratings of dozens of mortgage-based collateralized debt obligations (CDOs) issued in early 2007 that were in default within one year, some within six months.

The defaults dealt billions of dollars in losses to financial institutions insured by the US government, some of which collapsed in the 2008 crisis and others, like Citigroup, forced to seek a government bailout.

S&P was specifically charged with wire fraud, mail fraud and financial institution fraud. — Agence France-Presse

source: gmanetwork.com